Bright start to year as bargain hunting helps lift the spirits
The mood among Irish consumers brightened in last month as the seasonal sales helped the consumer sentiment index post its first monthly rise since September.
The IIB/ESRI Consumer Sentiment Index rose to 67.0 from 62.7 in December to record the largest monthly improvement since April last year.
IIB Bank economist Austin Hughes remained cautious however, saying that it is still too early to say we have reached a turning point.
"Indeed, it would not be surprising if the Consumer Sentiment series' all time low of 60.9, recorded in July 2003, were to be tested in February in the light of a good deal of gloomy news of late," he cautioned.
David Duffy of the ESRI was equally cautious, stating: "Although the overall index shows an increase, the components of the index suggest that consumers remain cautious. Consumers have become more negative in their perception of about the outlook for the overall economy."
The main driver of the improvement in consumer sentiment in January was a marked improvement in the buying climate, Mr Hughes explained.
He pointed out that traditionally there have been large swings in this element of the survey at the start of the year but that the bounce this January was somewhat smaller than seen in previous years.
According to the IIB Bank economist this hints at increasing caution among consumers and suggests that the January sales saw bargain hunting for targeted items rather than a spending free-for-all.
"Although the improvement in Irish consumers' willingness to buy big-ticket items largely reflects substantial price reductions in end-year sales, it is encouraging that consumers are able and willing to respond to lower prices.
"This confirms that consumers continue to see their own personal financial situation in a notably more favourable light than the general circumstances of the Irish economy," he said.
Mr Hughes added that "a broadly encouraging conclusion" is suggested by consumers' assessment of their own household finances.
For the second month in a row consumers upgraded their assessment of their own financial situation both for the past 12 months and for the year ahead.
"This may reflect in part a generally positive assessment of the Budget measures introduced by Mr Cowen in December," Mr Hughes argued, adding that it could also reflect the absence of more bad news on borrowing costs and perhaps even tentative signs that good news might emerge later in 2008.
But while the survey shows that consumers were less gloomy about their personal finances, it also shows that they remain apprehensive about the outlook for the Irish economy as a whole.